Congratulations to Ashlynn Heincy

Congratulations to IBAT’s Christmas and Holiday Art Contest Ages 8-10
Winner: Ashlynn Heincy (9) Ashlynn is the daughter of Felicia Heincy of Alliance Bank in Greenville.

All three of our young artists will be receiving a $250 savings bond. 
Thanks to all of our contestants for participating in this inaugural
program. View all the Honorable Mentions entries.

Congratulations to Alyssa Cantwell

Congratulations to IBAT’s Christmas and Holiday Art Contest Ages 5-7 Winner: Alyssa Monique Cantwell (7). Alyssa is the daughter of Texas Bank employee Olivia Cantwell in Early, TX.

All three of our young artists will be receiving a $250 savings bond.  Thanks to all of our contestants for participating in this inaugural program. View all the Honorable Mentions entries.

Lone Star Capital Bank Among Best in Contributors

IBAT's goal is to provide a diversity of opinions and viewpoints
about national banking news.  Some news articles do not necessarily
reflect the opinion of the Independent Bankers Association of Texas.

Bank among best in contributions

After being named United Way's No. 1 per capita giver among financial institutions in 2010, Lone Star Capital Bank employee contributions totaled $17,968.88, a 27 percent increase from last year's total of $14,129.96, according to a news release... read more. (Rest of article is mid-way down the page.)

IBAT Members in the News

IBAT's goal is to provide a diversity of opinions and viewpoints
about national banking news.  Some news articles do not necessarily
reflect the opinion of the Independent Bankers Association of Texas.

2012 Leadership San Antonio class named
The 54 participants will study business and government.
By David Hendricks

Fifty-four individuals have been selected from 120 applicants for the 37th Leadership San Antonio class, sponsored by the Greater San Antonio and San Antonio Hispanic chambers of commerce... read more.

IBAT Members include:

  • Jarrett Aiken, Frost National Bank
  • Dean Hobbs, TransPecos Banks
  • Curt Kruse, San Antonio National Bank
  • Brett Morgan, SWBC
  • Marc Sewell, Padgett Stratemann & Co. LLP
  • Elena Villasenor, Jackson Walker LLP 

American National Bank Gives Back

IBAT's goal is to provide a diversity of opinions and viewpoints
about national banking news.  Some news articles do not necessarily
reflect the opinion of the Independent Bankers Association of Texas.

Kind Angels
152 adopted from annual tree project
Published: Wednesday, December 14, 2011
By: Matt Price

Employees and customers of American National Bank in Kaufman donated more than $5,300 to help purchase gifts for 90 Salvation Army Angels and 10 Kaufman County Foster Parent Association Angels.

The American National Bank staff shopped for the 100 angels with the cash donations and then wrapped the presents seen in the picture above and made sure all of the packages were ready to go for Christmas. The Salvation Army picked up the gifts Tuesday and will see that the Christmas gifts will get to the angels... read more.

Statement on Regulations

IBAT's goal is to provide a diversity of opinions and viewpoints
about national banking news.  Some news articles do not necessarily
reflect the opinion of the Independent Bankers Association of Texas.

Bankers Digest Featured Articles December 12, 2011 Issue
Source: Joint Press Release

The Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC), and National Credit Union Administration (NCUA) (the prudential regulators), and the Bureau of Consumer Financial Protection (CFPB) (collectively the Agencies) issued a Supervisory Statement of November 17 which explains how the total assets of an insured bank, thrift, or credit union will be measured for purposes of determining supervisory and enforcement responsibilites under the Dodd-Frank Wall Street Reform and Consumer Porotect Act (Dodd-Frank)... read more.

SEC Shareholder Threshold

As reported in previous issues of IBAT’s Bottom Line newsletter, IBAT and ICBA have been working diligently to move legislation  to increase SEC shareholder threshold reporting requirements from the current 500 to 2,000. Such legislation has previously passed the House with only two dissenting votes. Texas’ Senior Senator Kay Bailey Hutchison has been championing our efforts in the Senate.

Senator Hutchison has  reintroduced her bill, now S.1941 which is identical to her previously introduced bill, S. 556, except that it drops the cost requirement for Congress to conduct a benefit analysis study.  This was  viewed as problematic by some Senators.  Last week, ICBA sent a letter to the full Senate touting the new bill and urged quick action on the measure.

It is hoped that Senator Hutchison can find some legislative vehicle to attach this important bill to before the end of this legislative year.  We will certainly be turning up our advocacy efforts in these final weeks of 2011.

Year-End Check List

Ready or not, the new year is right around the corner.  Have you created your year-end checklist?  If so, how many items on the list have you completed? Do you know which items you should complete before the end of the year and which you should wait to complete after you have year-end data? 

Each year, IBAT runs a Year-End Checklist in The Texas Independent Banker magazine.  The annual checklist, created by General Counsel Karen Neeley, is one of the more popular items provided by IBAT to its members.  It is also one of the most useful.  Along with a few new items, the 2011 year-end checklist article includes a checklist for your annual board meeting.  Click here to read Karen’s article and stack the odds in your favor that your checklist is complete.

Year-End Bonus Alert

If your calculation of year-end bonuses paid to your Mortgage Loan Originators includes income from mortgage loans in any way, shape or form, they may violate anti-steering rules in Regulation Z (12 CFR §226.36).  THIS INCLUDES BONUSES BASED ON INCOME OR PROFITABILITY THAT INCLUDE MORTGAGE PROFITS.  This week, IBAT received reports that the FDIC examiners are interpreting these anti-steering provisions very broadly.  Follow-up with the Consumer Financial Protection Bureau by IBAT General Counsel Karen Neeley confirmed that the CFPB agrees with the reports we received regarding the FDIC.

Read a memo from Neeley explaining the issue and offering some possible solutions.  If you believe that bonuses already paid may have violated anti-steering rules, contact the bank’s legal counsel.

While IBAT respectfully disagrees with this interpretation and will work to reverse it, unless and until we can convince the agencies to narrow their interpretation, bonuses will need to comply.  We would like to thank Kelly Earls of Bank Compensation Consulting for bringing this important and urgent issue to our attention.

Industry Earnings Continue Growth

IBAT's goal is to provide a diversity of opinions and viewpoints
about national banking news.  Some news articles do not necessarily
reflect the opinion of the Independent Bankers Association of Texas.

Bankers Digest Featured Articles December 5, 2011 Issue
Federal Deposit Insurance Corporation, Washington, D. C.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $35.3 billion in the third quarter of 2011, an $11.5 billion improvement from the $23.8 billion earned in the third quarter of 2010 and up from $28.8 billion the industry earned in the second quarter of 2011. This is the ninth consecutive quarter that earnings registered a year-over-year increase... read more.

IBAT Banker Richard Evans in the News

Richard W. Evans, Jr., Chairman and CEO of Frost Bank, was named one of American Banker’s Community Bankers of the Year for 2011.  The daily trade publication stated the award was given to Evans “for his unwavering commitment to the company’s conservative philosophy, which insulated it from the effects of the downturn and fostered growth in a time of decline”.

Evans joined Frost in 1971, was named President in 1985 and CEO in 1997.  Chris Williston, President and CEO of IBAT stated, “I join American Banker in recognizing the tremendous contributions of Dick Evans to the success of Frost Bank over the years, and congratulate him on this well-deserved honor.” 

You can read American Banker for free through IBAT's subscription program. Click here to learn more.

IT Security & TechMecca 2012

Earlier this week, two prominent hacker groups announced “Project Robin Rood,” aimed at “returning the money to those who have been… cheated or hurt by our banks.”  The goal of the project is to steal credit card numbers and access bank accounts to steal funds and “donate them to various charities across the globe.” 

The complexity and intensity of threats to the IT security of financial institutions is something every banker has to think about.  As customers demand greater access across mobile platforms, we’re all faced with the challenges of securing that information to mitigate the potential for fraud and theft. 

If you’re looking for insights on how your bank can beef up its security while adapting to the service demands of tomorrow then TechMecca 2012 is the conference for you!

TM 12 will also feature critical information on compliance, operational risks, mobile banking, technology trends, generational marketing and enterprise risk. 
Want to register?

TechMecca 2012 will include 100 booths to help you stay abreast of the
current technologies and trends. Included in the brochure is a roster of
exhibitors along with an agenda for the conference.

We have streamlined the conference to two days and streamlined the
pricing to benefit multiple registrations from each bank -- $595 for the
first attendee and two additional registrants.  THAT IS 3 ATTENDEES FOR THE PRICE OF ONE!

We invite you to enroll today by going to our website.

Protect your portfolio from tax lien lenders!

Protect Your Real Estate Collateral – Tax Lien Lender Considerations

All IBAT member banks make loans secured by real estate (both commercial and residential), and a substantial portion of those loans are kept “in-portfolio”.  Additionally, many of these loans do not have an escrow arrangement for insurance and taxes.  As property tax due dates are right around the corner, we wanted to make sure you were “covering your bases” with your customers responsible for paying their own taxes, especially with respect to tax lien loans.

In recent years, there has been a proliferation of entities and individuals offering “tax lien loans”.  In many cases, these companies scour the tax records, and solicit those who have not yet paid their property taxes.  While improvements have been made to this situation over the past several legislative sessions, there are still some significant pitfalls for you as a lender.

First and foremost, these lenders take a priority lien position in the property just as if they were the taxing authority.  Your collateral value will clearly be diminished in virtually all of these situations.  The loans generally are at high interest rates, and come with hefty fees, potentially impacting your borrower’s ability to repay.  Thus, both your customer and your bank will be adversely affected if such a loan is used for taxes.

While most of you already have a good system in place, please consider some or all of the following actions to mitigate some potentially expensive problems:

~ Procedures should be in place to annually contact your residential and commercial real estate loan customers (as necessary) to remind them that evidence of paid taxes is a requirement of the loan covenants.  This is especially important if there are indications (late or missed payments, overdrafts, etc.) of financial problems.  You may also wish to advise them that if they are having potential problems paying the taxes due, they should visit with their loan officer to discuss possible options, like adding the taxes on to their existing loan.  Additionally, you might wish to remind them that allowing a priority lien to be imposed on the property (such as a tax lien) violates one of the promises in the deed of trust, and is an event of default.

~ If you send payment notices or periodic statements, you might consider a notice on some or all of these stating that third party property tax lien transfers create a priority lien on the property and violates the loan agreement. 

~ Please remember that evidence of taxes paid does not disclose the source of the funds utilized to pay said taxes.  If your customer has contracted with a tax lien lender, there is simply no way to tell other than to check the public records.  A notice of tax lien transfer must be sent to the first lienholder of record under state law, but only “after the fact”.

~ Your home equity loan portfolio is obviously also subject to risk in this area.

Proper procedures and proactive measures can clearly alleviate potential problems and unnecessary diminution of collateral values.  Tax lien lenders are licensed and regulated by the Office of the Consumer Credit Commissioner, 512/936-7600 or feel free to call Shannon Phillips at IBAT (800/749-4228) if you have questions or comments.

Fair Lending Webinar

IBAT invites you to register for the IBAT Fair Lending Webinar: Are You A Violation Waiting to Happen? on December 12th at 2:00pm.

Members: $95

Non Member: $195

Speakers: Karen Neeley, Cox, Smith, Matthews, Inc.; Chet Fenimore, Fenimore, Kay, Harrison & Ford LLP; Shannon Phillips, IBAT

Bankers should be asking themselves some key questions:

  • How does my bank’s fair lending program stack up?
  • Does my bank’s internal or external fair lending review function meet current expectations?
  • Will my bank be prepared for its next fair lending examination?

This webinar will explore the regulation’s most dangerous areas, with
significant references to the fair lending examination procedures to
inform you of what to expect from examiners, as well as common sense
reviews that every bank can use to assure proper adherence to the
regulations. The participant materials will serve as a valuable resource
to assist you in understanding the regulation, and include tools to
assist in your internal review efforts.

Outline of Webinar:

  • Portfolio review for evidences of fair lending violation
  • Review of Fair Lending Laws (broad overview)
  • Review of Select Provisions (common trip wires)
  • Review of Recent Enforcement Actions
  • Impact of Dodd-Frank on Fair Lending Laws
  • Fair Lending “Overlap” into Operations and Deposits

Recent Legal Ease Article

Fair Lending.  We continue to see fair lending issues relating to
pricing of consumer loans.  The regulators are performing a statistical
analysis to determine whether there is a difference of 25 basis points
or more that is not supportable by a valid, nondiscriminatory business
reason.  Most of the exams have focused on Hispanic versus White
borrowers.  The examiners use the census list of common Hispanic names
to identify Hispanic borrowers.

Examiners are particularly concerned where there is a recurring
difference in rates that ties to a particular officer.  They are looking
for “pattern or practice” of higher pricing for a protected class. 
Defending your rates based on the fact that you “know your customers”
and price based on risk will not work unless you have clear policies and
pricing guidelines.  Here are some recommendations.

Rate Sheets.  Use them for all types of consumer loans, not just
residential mortgages.  Establish different brackets for clear,
risk-based factors like credit score, amount of down payment, size of
loan and term.  Remember, though, that a policy considering the size of
the loan must not indirectly discriminate against protected classes. 
For very small consumer loans, the amount advanced is relevant as to how
the bank will recoup the cost of making that loan.

Deviations.  Allow sparingly.  Differences/adjustments should be
small in amount and supported by a valid business reason.  Require a
senior officer to approve the deviation.  Support the request in a
written loan memo.

Training.  Require all loan officers and the board to undergo fair lending training on an annual basis.

Remember that if a “pattern or practice” of discriminatory pricing is
found, the bank will be referred to the Department of Justice.  Its CRA
rating will be downgraded.  It may also be required to make
reimbursement of excessive interest to the protected consumers and could
also be hit with a civil money penalty.

FAIR LENDING:  Legal Ease Archive

The mortgage crisis has created an enhanced interest in fair lending
principles.  Congress, regulators, and the press are all expressing
concern that predatory lending practices, particularly in the subprime
market, have contributed to problems with regard to foreclosure. 
Furthermore, the expanded data on the Home Mortgage Disclosure Act
(HMDA) reports have provided more fodder for review.  Unfortunately,
even with the expanded information on the HMDA report, it still does not
include all of the information that reflects a lender’s underwriting
decision.  This is a two-edge sword as it would be very expensive for
lenders to also track credit scores and include those on HMDA LARS as
well as the other information currently required.

We are also seeing more fair lending examinations as the HMDA analysis
reflects so-called “outliers.”  Thus, even though a compliance exam has
reflected that an institution’s underwriting is nondiscriminatory, a
fair lending examination may still be imposed if the HMDA data indicates
that there are statistically significant differences in interest rates
between different groups.

What is “fair lending”?
  There isn’t actually a single “fair
lending” act.  Rather, this is a shorthand way of referring to several
laws applicable to nondiscrimination in the lending area.  These include
the Equal Credit Opportunity Act as implemented by Regulation B, the
Fair Housing Act, which prohibits redlining, and the Community
Reinvestment Act.  HMDA is the mechanism by which reports are generated
to evaluate mortgage compliance with the fair lending laws.

What is prohibited?  Basically, it is unlawful for a creditor to
discriminate against any applicant with respect to any aspect of a
credit transaction (which includes not only a decision to make a loan
but also its terms) on the basis of race, color, religion, national
origin, sex or marital status, or age; because all or part of the
applicant’s income derives from public assistance programs; or because
the applicant has in good faith exercised any right under the Consumer
Credit Protection Act.  These protective classes are found in the Equal
Credit Opportunity Act.  The Fair Housing Act is very similar but it
also applies to real estate transactions more broadly including sale of
property, rental, and advertising as well as lending.  In addition to
race or color, national original and religion and sex, the Fair Housing
Act also prohibits discrimination based on familial status and handicap.

What constitutes discrimination?
  Although the statutes do not
explicitly provide for different tests, the regulators have used an
employment style analysis with regard to lending discrimination.  Thus,
discrimination could be overt, disparate impact, or disparate
treatment.  Overt discrimination is fairly straight forward.  This is
where an individual transaction decision about credit is made based
impermissibly on a prohibited basis.  Disparate treatment can be
established either by statements revealing that a lender explicitly
considered prohibited factors or by differences in treatment that are
not fully explained by legitimate nondiscriminatory factors.  Disparate
impact occurs when a lender applies a facially neutral policy or
practice equally to all credit applicants but that policy or practice
disproportionately excludes or burdens certain persons on a prohibited
basis.  An example given by the regulators is a policy by which loans
for single family residences are not made for less than $60,000.  If
that minimum amount disproportionately excludes potential minority
applicants, then this could have a disparate impact on minorities. 
[note:  For home equity loans, the bank may have a business reason for
setting a threshold size in order to recover costs of making the loan.] 
Disparate treatment is often shown where a particular group is steered
into a particular type of product that is less favorable than a
non-protected class is directed to. 

What are the consequences of fair lending violations?  First,
individuals have certain civil rights and can bring a civil suit for
damages.  That is not as likely to be a major consideration for most
lenders.  The most significant issue is regulatory enforcement. 
Depending on the number of violations and whether there is a pattern or
practice, a regulator may seek prospective and retrospective relief. 
Prospective relief could include adopting corrective policies and
procedures, training, community outreach, better internal audit controls
and oversight systems, and monitoring of compliance with periodic
reports to the primary federal regulator.  Retrospective relief could
include identifying customers who are subject to discrimination and
offering them credit that they were improperly denied or requiring
restitution to injured parties.  Civil money penalties are also

What should banks do to avoid fair lending problems?  First, make
sure that you have good policies in place to prohibit discrimination. 
Next, consider using internal testing, pairing a minority with a
comparable Anglo applicant to determine whether there is any disparate
treatment.  Self-testing is protected under Regulation B.  Be sure that
you have good training in place to assure that loan officers do not
inadvertently steer protected classes into a more expensive product.  In
addition, be sure that you have good HMDA reporting systems in place to
make sure that the data submitted is as accurate as possible.  Remember
that it is HMDA reports that trigger additional questions.  All too
often HMDA reporting is inadequate or incorrect.
Resources.  The publication “A Guide to HMDA Reporting: Getting
It Right!” is an excellent resource.  It is available online at the
FFIEC website.  There are also some HMDA training programs available at
the FFIEC website.  Also consider reviewing the FDIC publication “Side
by Side: A Guide to Fair Lending.”  For national banks, look at the
Comptroller’s Handbook on Fair Lending Examination Procedures.  All of
these are excellent tools that can assist you in making sure that your
programs are in good shape.

James C. Stewart, Jr., 1927-2011

Article from the James C. Stewart, Jr. Obituary

“Be strong and courageous. Do not be afraid or terrified because of them, for the Lord your God goes with you; He will never leave you or forsake you.”  Deuteronomy 31:6

The life of beloved longtime community banker, James C. Stewart, Jr. (1927-2011), Executive Vice President of Independent Bank-McKinney, was celebrated on Wednesday, November 23, 2011 at the First Baptist Church in McKinney, Texas.

James C. Stewart, Jr. was born in Blue Ridge, Texas in 1927. The single child of James C. Stewart Sr. and Cleo Jetton Stewart, Mr. Stewart moved with his parents to McKinney in second grade, and he has been a fixture in the local banking community ever since. Banking runs in Stewart’s family; he was the son of the President of Central National Bank of McKinney and the grandson of the owner of Continental Bank and Trust Co. of Blue Ridge, Texas.

Mr. Stewart was a 1949 graduate of North Texas State University, where he studied Business.  Married to his wife, Marilyn, for 58 years, they had three children: Lynn Heard (a national bank examiner in NYC), James C. Stewart III (High School Teacher and Coach in White Deer, TX), and William Stewart (Loan Officer for First United Bank, McKinney).

Having worked for his father’s Central National Bank since 1949, he worked for all successor banks (the bank eventually became Bank Texas) and he tried to retire in January of 1988. However, he went back to work in November of 1989, and continued to develop new business for Independent Bank until the last weeks of his life.

In a banking career spanning over 60 years, Mr. Stewart attributed his longevity in the industry to “treating others like he’d like to be treated.”  He taught young banking professionals to treat everyone who came through the door the same. He was truly a man of his word and took “handshake deals” seriously. He was successful in business development because he was committed to being honest with his customers and did not believe in ‘stringing’ customers or prospects along. When asked what his favorite aspect of banking was, he was known to respond, “the friendships” that he developed over the years. He genuinely loved helping people and it showed.  
Mr. Stewart was active in the McKinney Lions Club, the First Baptist Church of McKinney, and was a former Member of the McKinney City Council and a former President of the McKinney Chamber of Commerce.

His was a life well lived with great influence. Mr. Stewart will be deeply missed by his family and all his friends and colleagues at Independent Bank.

In lieu of flowers, memorials may be made to the First Baptist Church of McKinney Building Fund.

Congressman Charlie Gonzalez Retiring

Congressman Charlie Gonzalez of Texas’s 20th Congressional District announced his retirement last week, following fourteen years in the U.S. House of Representatives and fifty consecutive years in which the district has been held by a member of the Gonzalez family.  

“Congressman Gonzalez has been a great advocate for and friend of Texas Community banks,” said IBAT President and CEO Chris Williston.  “We’re sorry to see him go but wish him well in his new life after public service” he added.

In a statement released over the weekend, House Minority Leader Nancy Pelosi praised Gonzalez, calling him ”a dynamic leader and a strategic legislator [who] brought substantial judicial experience and represented his hometown of San Antonio admirably.”

State Representative Joaquin Castro has announced his plan to run for the vacated 20th District.

Bank of the Week: Alliance Bank

Congratulations to Alliance Bank on receiving a Gold Eagle in the 20th Annual Best of Community Banking Awards sponsored by the Independent Bankers Association of Texas (IBAT).  Jake Caddell was on hand to accept the award presented during the annual IBAT Convention.

The Sulphur Springs bank was recognized in the Marketing category for a campaign tied to convenience banking.

Targeting existing and future customers, the bank began with a check card campaign that included lobby displays, print and radio support and expanded the campaign to social media with a Facebook IPAD2 sweepstakes and broad based e-statement campaign that included QR codes, statement stuffers, electronic message boards and Internet landing pages.

The annual awards recognize IBAT member institutions in several categories for service to their communities.  Winners are judged on innovation and creativity, number of people benefited or affected and the success in fulfilling a community need.

Elmquist Named FDIC Regional Director

The FDIC last week named Kristie Elmquist as Regional Director for the Dallas Regional Office.

Kristie has been acting in this position since March of 2010.  Formerly, she served as Deputy Regional Director in Dallas for Risk Management in 2008.  Kristie holds commissions in both Risk Management and Compliance, has served the Corporation in Dallas, New York, Kansas City and in the Washington Office.  During her 22 year FDIC career, she has held several management positions, including Acting Associate Director for Compliance Examination Support, Assistant Regional Director, Corporate University Chair for Consumer Protection and Risk Management, and Field Supervisor. 

IBAT congratulates Kristie on her promotion, and appreciates her ongoing “open door” policy on issues important to community banking.  

Drawing Lines In The Sand

When a particular article or blog catches our eye, we like to bring it to your attention.  Kevin Funnell, a banking  attorney in Frisco, has a regular blog that is to the point, witty and insightful . . . and in many cases acerbic.  In a recent blog, “Drawing Lines in the Sand”, he provides an interesting take on community banking’s continuing quest to seek real legislative fixes for some of the challenges we face, and the role of the national trade groups in that ongoing saga.  It’s worth your two minutes in our assessment.

Four Ideas for the Financial System

IBAT's goal is to provide a diversity of opinions and viewpoints
about national banking news.  Some news articles do not necessarily
reflect the opinion of the Independent Bankers Association of Texas.

By Barbara A. Rehm
NOV 16, 2011

Regulators implementing the Dodd-Frank Act are writing massive, complicated rules that corporations will maneuver to exploit and federal examiners will struggle to enforce.

There has to be a better way, right? The answer is clear: we need to engage in some clean-slate thinking about fundamental issues like bank funding and capital.

Here are a few ideas.

Change the tax code... read more.

You can read American Banker for free through IBAT's subscription program. Click here to learn more.

Employment Practices Liability



The Laws and The Claims Process

Wednesday, December 7, 2011
10:00 a.m. CST

It’s embarrassing when you’re faced with allegations of sexual harassment or discrimination or any other employee related action.   But one of the worst things you could do is try to handle it yourself.  You should always turn to your insurance carrier on these matters and the sooner the better.

Join Travelers and IBAT Financial Services in a webinar that discusses the laws that direct employment practices issues, basics of the EPL policy and details of the claims process and it’s importance.

Simply click here and follow the instructions. 
The webinar details will be e-mailed to you.